Daily Update: Australian Economic Growth is Down (Under)
Today is?Wednesday, November 30, 2022, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global . Subscribe?to be notified of each new?Daily?Update.?
Australia’s economic outlook is not optimistic, especially since its economy recently contracted after eight straight months of growth, according to the S&P Global Flash Australia Composite PMI.
The survey-based Purchasing Managers’ Index, or PMI,?provides insight into business conditions ?by measuring changes in costs, selling prices, employment, purchasing activity and more. The flash PMI, typically published a week before the final PMI, is an early estimate of this data.
Australian flash PMI data was released Oct. 24 and showed that?the country’s private sector economy shrank for the first time since 2022 began . This can be “primarily attributed to the poorer performance in the service sector, where demand contracted at the fastest pace since September 2021,” said Jingyi Pan, an economics associate director of the PMI team at S&P Global Market Intelligence. The lack of demand for services is caused by rising interest rates and economic uncertainty.
Like many places, Australia has increased interest rates in response to inflation. According to S&P Global Ratings,?inflation in the country rose by an average of 6.5% this year . Australian PMI surveys?reported record inflation rates ?for input costs in April and output prices in July, said Laura Denman, an economist on the Economic Indicators & Surveys team at S&P Global Market Intelligence.
Input cost inflation started easing in September, but this didn’t help lower output price inflation, which continued to grow the following month. “This is an especially worrying trend given the potential to further corrode demand directly through higher costs, and also indirectly … via the Reserve Bank of Australia's reaction in lifting interest rates,” Pan said.
Besides inflation and rising interest rates, Australia’s economy has been hit by high costs for energy, transportation and wages; the Russia-Ukraine conflict’s effect on energy prices; and lingering supply chain issues related to Chinese COVID-19 lockdowns.
Supply delays do seem to be shortening overall, Pan said, but the flash PMI suggests that demand is low in the manufacturing sector, which could pose a big challenge.
The Future Output Index, a subindex of the PMI, is based on sentiment that measures business confidence. In Australia,?the Future Output Index in October dropped to its lowest point since April 2020 ?— not a good sign, considering that month was at the height of the COVID-19 pandemic. Anecdotal evidence indicates this was due to concerns around the impact of interest rates on demand and general economic uncertainty.
Australian economic performance in 2023 will in large part depend on how resilient demand is. But based on the Future Output Index, Pan said, “the current economic slowdown may continue in the coming months.”?S&P Global Ratings expects Australia’s real gross domestic product ?to rise by 3.9% year over year in 2022 and 1.8% year over year in 2023.
Today is?Wednesday, November 30, 2022, and here is today’s essential intelligence.
Written by Claire Delano.
Economy
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—Read the report from?S&P Global Ratings
Capital Markets
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—Read the article from?S&P Global Market Intelligence
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—Listen and subscribe to Platts Future Energy, a podcast from?S&P Global Commodity Insights
Energy & Commodities
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—Read the article from?S&P Global Commodity Insights
Technology & Media
New EV Entries Nibbling Away At Tesla EV Share
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—Read the article from?S&P Global Mobility